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Area factories pay more for materials

New York factories are seeing prices for materials shoot up in the wake of Hurricane Katrina, but it's too soon to say if the storm will halt the sector's growth streak, according to a survey by the Federal Reserve.

"There appears to be some deceleration of business activity, but not much at this point," said Richard Deitz, regional economist at the Federal Reserve Bank of New York's Buffalo Branch. "There wasn't a huge hit."

The state's manufacturing index declined to 17 percent, from 23 percent, but remained in positive territory -- indicating that the sector continues to grow. Business has been on an upswing since a one-month retraction in March. The Fed's monthly survey provides a look at factory-sector conditions in the first half of September, after Katrina hit the Gulf Coast. It polls about 100 companies across the state.

Energy prices probably caused a sharp rise in manufacturers' costs, Deitz said. Fifty-seven percent of respondents said prices they pay for inputs rose since August, while only 3.4 percent reported declines.

Some factories are passing along their higher costs to customers: 23 percent said their prices rose, while 10 percent reported declines.

The impact on employment appears muted. Seventy-two percent of factories said their employment remained the same; only 8 percent said they cut jobs.

Plastic-part maker Polymer Conversions in Orchard Park is paying 40 percent more for raw plastic than a year ago, and expects prices to go higher still.

"The Katrina effect is just starting," said Benjamin Harp, chief operating officer. The 80-person company makes injection-molded parts for medical devices and auto components. It generated record sales and profits for the year ended in August, he said.

So far, Polymer Conversions has been able to raise prices to recover higher costs, "but the dam's gotta break at some point," Harp said.

Asked about their expectations six months ahead, 39 percent of respondents foresee increased business, down from 53 percent in August.

e-mail: fwilliams@buffnews.com

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